-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L5pUpM06ycZWD/kuDhz/ca0qEgWiofD7Nz03qTrPw5Bn95sMdS/6mEh33t3fiauQ RxfS23KgCVWIodPWlt8kPA== 0000950109-97-005912.txt : 19970918 0000950109-97-005912.hdr.sgml : 19970918 ACCESSION NUMBER: 0000950109-97-005912 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970802 FILED AS OF DATE: 19970912 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ABERCROMBIE & FITCH CO /DE/ CENTRAL INDEX KEY: 0001018840 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FAMILY CLOTHING STORES [5651] IRS NUMBER: 311469076 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12107 FILM NUMBER: 97679539 BUSINESS ADDRESS: STREET 1: FOUR LIMITED PARKWAY CITY: REYNOLDSBURG STATE: OH ZIP: 43068 BUSINESS PHONE: 6144797101 MAIL ADDRESS: STREET 1: THREE LIMITED PARKWAY CITY: COLUMBUS STATE: OH ZIP: 43230 10-Q 1 ABERCROMBIE & FITCH CO. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------------- FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 2, 1997 -------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________to____________________ Commission file number 1-12107 ------- ABERCROMBIE & FITCH CO. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 31-1469076 - ---------------------------- --------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) Four Limited Parkway East, Reynoldsburg, OH 43068 ------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (614) 577-6500 ----------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class A Common Stock Outstanding at August 29, 1997 --------------------------- ------------------------------------ $.01 Par Value 8,007,339 Shares Class B Common Stock Outstanding at August 29, 1997 --------------------------- ------------------------------------ $.01 Par Value 43,000,000 Shares ABERCROMBIE & FITCH CO. TABLE OF CONTENTS Page No. -------- Part I. Financial Information Item 1. Financial Statements Consolidated Statements of Income Thirteen and Twenty-six Weeks Ended August 2, 1997 and August 3, 1996......................3 Consolidated Balance Sheets August 2, 1997 and February 1, 1997....................4 Consolidated Statements of Cash Flows Twenty-six Weeks Ended August 2, 1997 and August 3, 1996......................5 Notes to Consolidated Financial Statements.......................6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition.........10 Part II. Other Information Item 1. Legal Proceedings...........................................15 Item 5. Other Information...........................................15 Item 6. Exhibits and Reports on Form 8-K............................15 2 PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS ABERCROMBIE & FITCH CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Thousands except per share amounts) (Unaudited)
Thirteen Weeks Ended Twenty-six Weeks Ended ----------------------------------- ----------------------------------- August 2, August 3, August 2, August 3, 1997 1996 1997 1996 ---------------- --------------- --------------- --------------- NET SALES $86,640 $57,431 $160,956 $108,451 Cost of Goods Sold, Occupancy and Buying Costs 58,854 39,379 109,229 75,505 ---------------- --------------- --------------- --------------- GROSS INCOME 27,786 18,052 51,727 32,946 General, Administrative and Store Operating Expenses 23,196 16,227 45,157 31,520 ---------------- --------------- --------------- --------------- OPERATING INCOME 4,590 1,825 6,570 1,426 Interest Expense, Net 1,167 1,151 2,202 1,151 ---------------- --------------- --------------- --------------- INCOME BEFORE INCOME TAXES 3,423 674 4,368 275 Provision for Income Taxes 1,370 300 1,750 100 ---------------- --------------- --------------- --------------- NET INCOME $2,053 $374 $2,618 $175 ================ =============== =============== =============== NET INCOME PER SHARE $0.04 $0.01 $0.05 $0.00 ================ =============== =============== =============== WEIGHTED AVERAGE SHARES OUTSTANDING 51,322 43,000 51,195 43,000 ================ =============== =============== ===============
The accompanying notes are an integral part of these consolidated financial statements. 3 ABERCROMBIE & FITCH CO. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Thousands)
August 2, February 1, 1997 1997 ------------------ ----------------- (Unaudited) ASSETS ------ CURRENT ASSETS: Cash $2,317 $1,945 Accounts Receivable 2,669 2,102 Inventories 60,686 34,943 Store Supplies 5,965 5,300 Other 2,395 588 ------------------ ----------------- TOTAL CURRENT ASSETS 74,032 44,878 PROPERTY AND EQUIPMENT, NET 64,278 58,992 DEFERRED INCOME TAXES 2,085 1,885 OTHER ASSETS 5 6 ------------------ ----------------- TOTAL ASSETS $140,400 $105,761 ================== ================= LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Accounts Payable $11,606 $6,414 Accrued Expenses 30,762 22,388 Intercompany Payable 33,808 5,417 Income Taxes Payable 119 9,371 ------------------ ----------------- TOTAL CURRENT LIABILITIES 76,295 43,590 LONG-TERM DEBT 50,000 50,000 OTHER LONG-TERM LIABILITIES 1,085 933 SHAREHOLDERS' EQUITY: Common Stock 511 511 Paid-in Capital 117,975 117,980 Retained Deficit (104,635) (107,253) ------------------ ----------------- 13,851 11,238 Less Treasury Stock, at Average Cost (831) -- ------------------ ----------------- TOTAL SHAREHOLDERS' EQUITY 13,020 11,238 ------------------ ----------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $140,400 $105,761 ================== =================
The accompanying notes are an integral part of these consolidated financial statements. 4 ABERCROMBIE & FITCH CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Thousands) (Unaudited)
Twenty-six Weeks Ended ---------------------------------- August 2, August 3, 1997 1996 ------------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $2,618 $175 Impact of Other Operating Activities on Cash Flows: Depreciation and Amortization 7,080 5,487 Changes in Assets and Liabilities: Inventories (25,743) (22,531) Accounts Payable and Accrued Expenses 13,566 3,625 Income Taxes (9,452) (5,600) Other Assets and Liabilities (2,462) 102 ------------- ----------- NET CASH USED FOR OPERATING ACTIVITIES (14,393) (18,742) ------------- ----------- CASH USED FOR INVESTING ACTIVITIES Capital Expenditures (12,790) (2,833) ------------- ----------- FINANCING ACTIVITIES: Increase in Intercompany Payable 28,391 22,128 Purchase of Treasury Stock (852) -- Stock Options and Other 16 -- Dividend Paid to Parent -- (27,000) Proceeds from Credit Agreement -- 150,000 Repayment of Trademark Obligations -- (32,000) Repayment of Intercompany Debt -- (91,000) ------------- ----------- NET CASH PROVIDED FROM FINANCING ACTIVITIES 27,555 22,128 ------------- ----------- NET INCREASE IN CASH 372 553 Cash, Beginning of Year 1,945 874 ------------- ----------- CASH, END OF PERIOD $2,317 $1,427 ============= ===========
In the twenty-six weeks ended August 3, 1996, non-cash financing activities included the distribution of a note representing pre-existing obligations of Abercrombie & Fitch's operating subsidiary in respect of certain trademarks in the amount of $32 million by Abercrombie & Fitch's trademark subsidiary to The Limited, Inc., distribution of the $50 million note and the conversion of $8.6 million of intercompany debt into a working capital note. The accompanying notes are an integral part of these consolidated financial statements. 5 ABERCROMBIE & FITCH CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION Abercrombie & Fitch Co. (the "Company") is a specialty retailer of high quality, casual apparel for men and women with an active, youthful lifestyle. The accompanying consolidated financial statements include the historical financial statements of, and transactions applicable to Abercrombie & Fitch Co. and its subsidiaries and reflect the assets, liabilities, results of operations and cash flows on a historical cost basis. An initial public offering of 8.05 million shares of the Company's Class A common stock was consummated in the third quarter of 1996 and, as a result, approximately 84% of the outstanding common stock of the Company is owned by The Limited, Inc. ("The Limited"). The common stock issued to The Limited (43 million Class B shares) in connection with the incorporation of the Company has been reflected as outstanding for all periods presented. The consolidated financial statements as of August 2, 1997 and for the thirteen and twenty-six week periods ended August 2, 1997 and August 3, 1996 are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's 1996 Annual Report on Form 10K. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments (which are of a normal recurring nature) necessary to present fairly the financial position and results of operations and cash flows for the interim periods, but are not necessarily indicative of the results of operations for a full fiscal year. The consolidated financial statements as of August 2, 1997, and for the thirteen and twenty-six week periods ended August 2, 1997 and August 3, 1996 included herein have been reviewed by the independent public accounting firm of Coopers & Lybrand L.L.P. and the report of such firm follows the notes to consolidated financial statements. 2. ADOPTION OF ACCOUNTING STANDARD In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." The ------------------ Company will adopt the computation, presentation and disclosure requirements for earnings per share in the fourth quarter of 1997, the effect of which will not be material to the Company's consolidated financial statements. 6 3. INVENTORIES The fiscal year of the Company and its subsidiaries is comprised of two principal selling seasons: Spring (the first and second quarters) and Fall (the third and fourth quarters). Valuation of finished goods inventories is based principally upon the lower of average cost or market determined on a first-in, first-out basis utilizing the retail method. Inventory valuation at the end of the first and third quarters reflects adjustments for inventory markdowns and shrinkage estimates for the total selling season. 4. PROPERTY AND EQUIPMENT, NET Property and equipment, net, consisted of (thousands):
August 2, February 1, 1997 1997 ------------ ------------ Property and equipment, at cost $112,997 $101,919 Accumulated depreciation and amortization (48,719) (42,927) ------------ ------------ Property and equipment, net $64,278 $58,992 ============ ============
5. INCOME TAXES The Company is included in The Limited's consolidated federal and certain state income tax groups for income tax reporting purposes and is responsible for its proportionate share of income taxes calculated upon its federal taxable income at a current estimate of the Company's annual effective tax rate. Income taxes paid during the twenty-six weeks ended August 2, 1997 and August 3, 1996 approximated $12.2 million and $5.7 million. 6. LONG-TERM DEBT Long-term debt consists of a 7.80% unsecured note in the amount of $50 million that matures May 15, 2002, and represents the Company's proportionate share of certain long-term debt of The Limited. The interest rate and maturity of the note parallels that of corresponding debt of The Limited. Interest paid during the twenty-six weeks ended August 2, 1997 and August 3, 1996, including interest on the intercompany cash management account (see Note 7), approximated $0.1 million and $0.8 million. 7 7. INTERCOMPANY RELATIONSHIP WITH PARENT The Limited provides various services to the Company including, but not limited to, store design and construction supervision, real estate management, travel and flight support and merchandise sourcing. To the extent expenditures are specifically identifiable they are charged to the Company. All other related support expenses are charged to the Company and other divisions of The Limited based upon various allocation methods. The Company participates in The Limited's centralized cash management system whereby cash received from operations is transferred to The Limited's centralized cash accounts and cash disbursements are funded from the centralized cash accounts on a daily basis. After the initial capitalization of the Company on July 11, 1996, the intercompany cash management account became an interest earning asset or interest bearing liability of the Company depending upon the level of cash receipts and disbursements. Interest on the intercompany cash management account is calculated based on 30-day commercial paper rates for "AA" rated companies as reported in the Federal Reserve's H.15 statistical release. The average outstanding balance of the non-interest bearing intercompany payable to The Limited in the twenty-six week period ended August 3, 1996 approximated $64.5 million. A summary of the intercompany payment activity for the twenty-six weeks ended August 3, 1996 follows. Balance at February 3, 1996........................ $ 86,045 Mast and Gryphon purchases......................... 23,178 Other transactions with related parties............ 9,667 Centralized cash management........................ (16,417) Settlement of current period income taxes.......... 5,700 Payment to The Limited............................. (91,000) Conversion to Working Capital Note................. (8,616) -------- Balance at August 3, 1996.......................... $ 8,557 ========
The Company's proprietary credit card processing is performed by Alliance Data Systems which is 40%-owned by The Limited. The Company and The Limited are parties to a corporate agreement under which the Company granted to The Limited a continuing option to purchase, under certain circumstances, additional shares of Class B Common Stock or shares of nonvoting capital stock of the Company. The Corporate Agreement further provides that, upon request of The Limited, the Company will use its best efforts to effect the registration of any of the shares of Class B Common Stock and nonvoting capital stock held by The Limited for sale. 8 [LETTERHEAD OF COOPERS & LYBRAND APPEARS HERE] REPORT OF INDEPENDENT ACCOUNTANTS To The Board of Directors of Abercrombie & Fitch Co. We have reviewed the condensed consolidated balance sheet of Abercrombie & Fitch Co. at August 2, 1997, and the related condensed consolidated statements of operations and cash flows for the thirteen-week and twenty-six-week periods ended August 2, 1997 and August 3, 1996. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of February 1, 1997, and the related consolidated statements of operations, shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 24, 1997, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of February 1, 1997, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ Coopers & Lybrand L.L.P. COOPERS & LYBRAND L.L.P. Columbus, Ohio September 10, 1997 9 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS During the second quarter of 1997, net sales increased 51% to $86.6 million from $57.4 million a year ago. Earnings per share were $.04 in the second quarter of 1997 compared to $.01 in 1996, on an adjusted basis. Year-to-date earnings per share were $.05 in 1997 compared to a loss of ($.01) per share on an adjusted basis. The adjusted results for the prior year periods presented reflect: 1) 51.05 million shares outstanding to give effect to the 8.05 shares issued to the public, and 2) interest expense on the Company's ongoing capital structure and seasonal borrowings. Seasonal borrowings are provided through The Limited centralized cash management system and are reflected in the Company's intercompany balances with The Limited. The following summarized statements of operations data compare the thirteen and twenty-six week periods ended August 2, 1997 and August 3, 1996 to the adjusted information for the comparable 1996 periods (in thousands except per share data):
Thirteen Weeks Ended -------------------------------------------------------------- August 2, 1997 August 3, 1996 August 3, 1996 -------------------- -------------------- ------------------- (Adjusted) Operating income $4,590 $1,825 $1,825 Interest expense, net 1,167 1,352 1,151 -------------------- -------------------- ------------------- Income before income taxes 3,423 473 674 Provision for income taxes 1,370 190 300 -------------------- -------------------- ------------------- Net income $2,053 $283 $374 ==================== ==================== =================== Net income per share $0.04 $0.01 $0.01 ==================== ==================== =================== Weighted average shares outstanding 51,322 51,050 43,000 ==================== ==================== ===================
10
Year-to-Date ------------------------------------------------------------ August 2, 1997 August 3, 1996 August 3, 1996 ------------------- ------------------- ------------------ (Adjusted) Operating income $6,570 $1,426 $1,426 Interest expense, net 2,202 2,548 1,151 ------------------- ------------------- ------------------ Income (loss) before income taxes 4,368 (1,122) 275 Provision for (benefit from) income taxes 1,750 (450) 100 ------------------- ------------------- ------------------ Net income (loss) $2,618 ($672) $175 =================== =================== ================== Net income (loss) per share $0.05 ($0.01) $0.00 =================== =================== ================== Weighted average shares outstanding 51,195 51,050 43,000 =================== =================== ==================
Financial Summary - ----------------- The following summarized financial and statistical data compares the thirteen and twenty-six week periods ended August 2, 1997 to the comparable 1996 periods:
Second Quarter Year-to-Date ---------------------------------------- ------------------------------------ 1997 1996 Change 1997 1996 Change ------------ ----------- ---------- ---------- ----------- ---------- Increase in comparable store 15% 16% 14% 16% sales Sales increase attributable to 36% 33% 34% 35% new and remodeled stores Sales per average selling square foot $81 $70 16% $153 $134 14% Sales per average store $639 $552 16% $1,210 $1,053 15% (thousands) Average store size at end of 7,921 7,830 1% quarter (selling square feet) Selling square feet at end of 1,101 830 33% quarter (thousands) Number of stores: Beginning of period 132 102 127 100 Opened 7 4 12 6 ------------ ----------- ---------- ----------- End of period 139 106 139 106 ============ =========== ========== ===========
11 Net Sales - --------- Net sales for the second quarter of 1997 increased 51% to $86.6 million from $57.4 million in the year earlier period. The increase was due to a comparable store sales increase of 15%, combined with the addition of 33 new stores as compared to the second quarter of 1996. Comparable store sales increases were strong in both men's and women's categories with continued strong performances in knits and shorts in the men's business and knits, denim and pants in the women's business. Year-to-date net sales were $161.0 million, an increase of 48%, from $108.5 million for the same period in 1996. Sales growth resulted from a comparable store sales increase of 14% and the addition of 33 new stores. Net sales per selling square foot for the Company increased 14%. Gross Income - ------------ Gross income, as a percentage of net sales, increased to 32.1% for the second quarter of 1997 from 31.4% for the same period in 1996. The increase was attributable to improved merchandise margins (representing gross income before the deduction of buying and occupancy costs) due primarily to higher initial markups (IMU). The 1997 year-to-date gross income, expressed as a percentage of net sales, increased 1.7% to 32.1%, from 30.4% for the comparable period in 1996. Merchandise margins increased as a percentage of net sales due to higher IMU while buying and occupancy costs were comparable to last year. General, Administrative and Store Operating Expenses - ---------------------------------------------------- General, administrative and store operating expenses, expressed as a percentage of net sales, were 26.8% in the second quarter of 1997 as compared to 28.3% for the same period in 1996. The improvement resulted primarily from expense leverage associated with the strong comparable store sales growth. General, administrative and store operating expenses, expressed as a percentage of net sales, were 28.1% and 29.1% for the year-to-date periods in 1997 and 1996, respectively. The improvement resulted from management's continued emphasis on expense control and the favorable leveraging of expenses, primarily store expenses, over higher sales volume. Operating Income - ---------------- Second quarter and year-to-date operating income, expressed as a percentage of net sales, were 5.3% and 4.1%, in 1997, up from 3.2% and 1.3% for the comparable periods in 1996. The improvement in operating income in these periods is a result of higher gross income and lower general, administrative and store operating expenses, expressed as a percentage of net sales. 12 Interest Expense - ---------------- Second quarter interest expense of $1.2 million was down $0.2 million from adjusted 1996 second quarter interest expense. The Company's year-to-date interest expense was $2.2 million, down from the adjusted $2.5 million in 1996. Interest expense in 1997 and adjusted 1996 included $975 thousand on the $50 million long-term debt. The balance was primarily from interest on short-term borrowings (see Note 7 of the Company's Consolidated Financial Statements). FINANCIAL CONDITION Liquidity and Capital Resources - ------------------------------- Cash provided from operating activities and cash funding from The Limited's centralized cash management system provide the resources to support operations including projected growth, seasonal working capital requirements and capital expenditures. A summary of the Company's working capital position and long-term ongoing capitalization follows (thousands):
August 2, February 1, 1997 1997 --------------- --------------- Working Capital (Deficit) ($2,263) $1,288 =============== =============== Capitalization: Long-term Debt $50,000 $50,000 Shareholders' Equity 13,020 11,238 --------------- --------------- Total Capitalization $63,020 $61,238 =============== ===============
Net cash used for operating activities totaled $14.4 million for the twenty-six weeks ended August 2, 1997 versus $18.7 million for the comparable period in 1996. Inventories of $60.7 million at August 2, 1997 increased 15% from August 3, 1996 levels, supporting the current year's sales growth. Correspondingly, accounts payable and accrued expenses also increased supporting the growth in inventories and sales. In addition, increased income tax payments in the first half of 1997 over last year were associated with higher pre-tax earnings. Investing activities encompassed capital expenditures, primarily for new stores. In 1996, financing activities were due to intercompany transactions and proceeds of $150 million from the Credit Agreement which were used to repay $91 million of intercompany debt and $32 million of Trademark Obligations and fund a $27 million dividend to The Limited. 13 Abercrombie & Fitch's operations are seasonal in nature and are comprised of two principal selling seasons: Spring (the first and second quarters) and Fall (the third and fourth quarters), with the fourth quarter, including the holiday season, accounting for at least 42% of net sales in each of the last two years. Accordingly, cash requirements are highest in the third quarter as the Company's inventory builds in anticipation of the holiday season. Capital Expenditures - -------------------- Capital expenditures, primarily for new and remodeled stores totaled $12.8 million for the twenty-six weeks ended August 2, 1997 versus $2.8 million for the comparable period of 1996. The Company estimates the average cost for leasehold improvements, furniture and fixtures for stores opened in 1997 will be approximately $815,000 per store, after giving effect to landlord allowances. Additionally, inventory purchases at cost are expected to average approximately $300,000. The Company anticipates spending $29-$34 million in 1997 for capital expenditures, of which $27-$32 million will be for new stores, the remodeling and/or expansion of existing stores and related improvements. The Company intends to add approximately 234,000 net selling square feet in 1997, which will represent a 23% increase over year-end 1996. It is anticipated that the increase will result from the addition of 30 new stores and remodeling and/or expansion of three stores. The Company expects capital expenditures will be funded principally by net cash provided by operating activities. Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 - -------------------------------------------------------------------------------- All forward-looking statements made by the Company involve material risks and uncertainties and are subject to change based on various important factors which may be beyond the Company's control. Accordingly, the Company's future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. Such factors include, but are not limited to, changes in consumer spending patterns, consumer preferences and overall economic conditions, the impact of competition and pricing, changes in weather patterns, political stability, currency and exchange risks and changes in existing or potential duties, tariffs or quotas, availability of suitable store locations on appropriate terms, ability to develop new merchandise, ability to hire and train associates, and other factors that may be described in the Company's filings with the Securities and Exchange Commission. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. 14 PART II OTHER INFORMATION Item 1. LEGAL PROCEEDINGS The Company is a defendant in a variety of lawsuits arising in the ordinary course of business. On April 8, 1997, the United States District Court, Central District of California, unsealed and permitted to be served an amended complaint previously filed in that court against the Company, The Limited and certain of The Limited's other subsidiaries by the American Textiles Manufacturers Institute, a textile industry trade association. The amended complaint alleges that the defendants violated the federal False Claims Act by submitting false country of origin records to the US Customs Service. The amended complaint seeks recovery on behalf of the United States in an unspecified amount. On June 2, 1997, the defendants filed a motion to dismiss the complaint and a motion to transfer the case to the United States District Court for the Southern District of Ohio, Eastern Division. On June 30, 1997, the motion to transfer was granted. The motion to dismiss the amended complaint remains pending. The Company believes the allegations made are without merit and intends to defend the lawsuit vigorously. Although it is not possible to predict with certainty the eventual outcome of any litigation, in the opinion of management, the foregoing proceedings are not expected to have a material adverse effect on the Company's financial position or results of operations. Item 5. OTHER INFORMATION The Company's Certificate of Incorporation includes provisions relating to potential conflicts of interest that may arise between the Company and The Limited. Such provisions were adopted in light of the fact that the Company and The Limited and its subsidiaries are engaged in retail businesses and may pursue similar opportunities in the ordinary course of business. Among other things, these provisions generally eliminate the liability of directors and officers of the Company with respect to certain matters involving The Limited and its subsidiaries, including matters that may constitute corporate opportunities of The Limited, its subsidiaries or the Company. Any person purchasing or acquiring an interest in shares of capital stock of the Company will be deemed to have consented to such provisions relating to conflicts of interest and corporate opportunities, and such consent may restrict such person's ability to challenge transactions carried out in compliance with such provisions. Investors should review the Company's Certificate of Incorporation before making any investment in shares of the Company's capital stock. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits -------- 3. Articles of Incorporation and Bylaws 3.1 Amended and Restated Certificate of Incorporation of the Company incorporated by reference to Exhibit 3.1 to the Company's quarterly report on Form 10-Q for the quarter ended November 2, 1996. 3.2 Bylaws of the Company incorporated by reference to Exhibit 3.2 to the Company's quarterly report on Form 10-Q for the quarter ended November 2, 1996. 15 4. Instruments Defining the Rights of Security Holders 4.1 Specimen Certificate of Class A Common Stock of the Company incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-1 (File No. 333-8231) (the "Form S-1"). 4.2 Certificate of Incorporation of The Limited, Inc. incorporated by reference to Exhibit 4.2 to the Company's Form S-1. 4.3 Bylaws of The Limited, Inc. incorporated by reference to Exhibit 4.3 to the Company's Form S-1. 4.4 Corporate Agreement by and between Abercrombie & Fitch Co. and The Limited, Inc., dated October 1, 1996 incorporated by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 2, 1996. 10. Material Contracts 10.1 Abercrombie & Fitch Co. Incentive Compensation Performance Plan incorporated by reference to Exhibit A to the Company's Proxy Statement dated April 14, 1997. 10.2 Abercrombie & Fitch Co. 1997 Restatement of the Abercrombie & Fitch Co. 1996 Stock Option and Performance Incentive Plan incorporated by reference to Exhibit B to the Company's Proxy Statement dated April 14, 1997. 10.3 Abercrombie & Fitch Co. 1996 Stock Plan for Non-Associate Directors incorporated by reference to Exhibit C to the Company's Proxy Statement dated April 14, 1997. 11. Statement re: Computation of Per Share Earnings 15. Letter re: Unaudited Interim Financial Information to Securities and Exchange Commission re: Incorporation of Independent Accounts' Report 27. Financial Data Schedule (b) Reports on Form 8-K ------------------- None. 16 SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ABERCROMBIE & FITCH CO. (Registrant) By /S/ Seth R. Johnson ------------------------------ Seth R. Johnson, Vice President and Chief Financial Officer* Date: September 12, 1997 - --------------------------------------- * Mr. Johnson is the principal financial officer and has been duly authorized to sign on behalf of the Registrant. 17 EXHIBIT INDEX -------------
Exhibit No. Document - ----------- ------------------------------------------- 11 Statement re: Computation of Per Share Earnings. 15 Letter re: Unaudited Interim Financial Information to Securities and Exchange Commission re: Incorporation of Independent Accountants' Report. 27 Financial Data Schedule.
EX-11 2 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 ---------- ABERCROMBIE & FITCH CO. AND SUBSIDIARIES COMPUTATION OF PER SHARE EARNINGS (Thousands except per share amounts)
Thirteen Weeks Ended --------------------------------------- August 2, August 3, 1997 1996 ----------------- ----------------- Net income $2,053 $374 ================= ================= Common shares outstanding: Weighted average 51,050 43,000 Dilutive effect of stock options 317 - Weighted average treasury shares (45) - ----------------- ----------------- Weighted average used to calculate net income per share 51,322 43,000 ================= ================= Net income per share $.04 $.01 ================= ================= Twenty-six Weeks Ended --------------------------------------- August 2, August 3, 1997 1996 ----------------- ----------------- Net income $2,618 $175 ================= ================= Common shares outstanding: Weighted average 51,050 43,000 Dilutive effect of stock options 178 - Weighted average treasury shares (33) - ----------------- ----------------- Weighted average used to calculate net income per share 51,195 43,000 ================= ================= Net income per share $.05 $.00 ================= =================
EX-15 3 LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATION [LETTERHEAD OF COOPERS & LYBRAND APPEARS HERE] EXHIBIT 15 ---------- Securities and Exchange Commission 450 5th Street, N.W. Judiciary Plaza Washington, D.C. 20549 We are aware that our report dated September 10, 1997, on our review of the interim consolidated financial information of Abercrombie & Fitch Co. for the thirteen-week and twenty-six-week periods ended August 2, 1997 and included in this Form 10-Q is incorporated by reference in the Company's registration statements on Form S-8, Registration Nos. 333-15941, 333-15943 and 333-15945. Pursuant to Rule 436(c) under the Securities Act of 1933, this report should not be considered a part of the registration statement prepared or certified by us within the meaning of Sections 7 and 11 of that Act. /s/ Coopers & Lybrand L.L.P. COOPERS & LYBRAND L.L.P. Columbus, Ohio September 10, 1997 EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) OF ABERCROMBIE & FITCH CO. AND SUBSIDIARIES FOR THE QUARTER ENDED AUGUST 2, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JAN-31-1998 FEB-02-1997 AUG-02-1997 2,317 0 2,669 0 60,686 74,032 112,997 48,719 140,400 76,295 50,000 0 0 511 12,509 140,400 86,640 86,640 58,854 58,854 23,196 0 1,167 3,423 1,370 2,053 0 0 0 2,053 $.04 $.04
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